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Accounts Receivable, Sales and Allowances
 9 Months Ended
Sep. 30, 2017
Receivables [Abstract]  
Accounts Receivable, Sales and Allowances
Accounts Receivable, Sales and Allowances
 
The nature of the Company’s business inherently involves, in the ordinary course, significant amounts and substantial volumes of transactions and estimates relating to allowances for product returns, chargebacks, rebates, doubtful accounts and discounts given to customers. This is typical of the pharmaceutical industry and is not necessarily specific to the Company. Depending on the product, the end-user customer, the specific terms of national supply contracts and the particular arrangements with the Company’s wholesaler customers, certain rebates, chargebacks and other credits are deducted from the Company’s accounts receivable. The process of claiming these deductions depends on wholesalers reporting to the Company the amount of deductions that were earned under the terms of the respective agreement with the end-user customer (which in turn depends on the specific end-user customer, each having its own pricing arrangement that entitles it to a particular deduction). This process can lead to partial payments to the Company against outstanding invoices as the wholesalers take the claimed deductions at the time of payment.
 
With the exception of the provision for doubtful accounts, which is reflected as part of selling, general and administrative expense, the provisions for the following customer reserves are reflected as a reduction of revenues in the accompanying condensed consolidated statements of comprehensive income. Additionally, with the exception of administrative fees and others, which is included as a current liability, the ending reserve balances are included in trade accounts receivable, net in the Company’s condensed consolidated balance sheets.
 
Net trade accounts receivable consists of the following (in thousands):
 
September 30,
2017
 
December 31,
2016
Gross accounts receivable (1)
$
405,379

 
$
519,175

Less reserves for:
 
 
 
Chargebacks (2)
(65,522
)
 
(80,360
)
Rebates (2)
(94,743
)
 
(97,935
)
Product returns
(45,666
)
 
(43,689
)
Discounts and allowances
(9,045
)
 
(12,389
)
Advertising and promotions
(954
)
 
(688
)
Doubtful accounts
(610
)
 
(960
)
Trade accounts receivable, net
$
188,839

 
$
283,154



(1) The reduction in the Gross accounts receivable balance as of September 30, 2017 when compared to the December 31, 2016 balance is due to higher Gross sales in the last two months of the fourth quarter of 2016 compared to the last two months of the third quarter of 2017.

(2) The reductions in the Chargebacks and Rebates balances as of September 30, 2017 when compared to the December 31, 2016 balance were primarily due to product mix, customer mix, price erosion and volume declines and payment timing. The price erosion and volume declines were due to increased industry pricing pressure and the competitive nature of our business.

For the three and nine month periods ended September 30, 2017 and 2016, the Company recorded the following adjustments to gross sales (in thousands):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
Gross sales
$
586,351

 
$
787,808

 
$
1,833,998

 
$
2,089,567

Less adjustments for:
 
 
 
 
 
 
 
Chargebacks (1)
(236,701
)
 
(347,106
)
 
(754,137
)
 
(856,699
)
Rebates, administrative and other fees (1)
(127,904
)
 
(130,429
)
 
(362,042
)
 
(321,718
)
Product returns
(6,187
)
 
(7,970
)
 
(22,721
)
 
(31,056
)
Discounts and allowances
(11,343
)
 
(15,014
)
 
(35,095
)
 
(40,185
)
Advertising, promotions and others
(1,788
)
 
(3,194
)
 
(5,015
)
 
(6,733
)
Revenues, net
$
202,428

 
$
284,095

 
$
654,988

 
$
833,176



(1) The decreases in chargebacks and rebates, administrative and other fees for the three month periods ended September 30, 2017 as compared to the same period in 2016, were primarily due to product mix, customer mix, price erosion and volume declines. For the nine months ended September 30, 2017 as compared to the same period in 2016, the decrease in chargebacks and increase in rebates, administrative and other fees were primarily due to product mix, customer mix, price erosion and volume declines. The price erosion and volume declines were due to increased industry pricing pressure and the competitive nature of our business.